The UK Short-Term Rental Market: Trends, Data, and 2026 Outlook

As we close the book on 2025, the UK short-term rental (STR) market finds itself at a fascinating crossroads. It is a market characterised by a mix of stabilising performance, shifting traveller demographics, and a "new normal" in booking behaviours.

For property owners, investors, and property managers, the "post-pandemic boom" narrative has officially ended, replaced by a more mature, competitive landscape. While supply continues to climb, demand has softened in key areas, forcing operators to rely on pricing power rather than volume to drive growth.

Drawing on the latest data from August through November 2025, we explore the current state of the UK short-term rental market and identify where the opportunities—and regulatory risks—lie for the year ahead.

1. Supply is Outpacing Demand

The most immediate challenge facing the market is the imbalance between inventory growth and guest uptake.

Throughout 2025, the number of available listings surged. By August 2025, there were 491,582 short-term rental properties available across the UK, a 4% increase from the previous year. This trend of increasing supply was consistent across all UK regions, with significant spikes in the North East (9% growth) and the East Midlands (8% growth).

However, traveller demand has not scaled at the same rate. In August 2025, the total volume of reserved nights fell to 7.0 million, a 5% decrease from the 2024 high.

The Impact on Occupancy: Because supply grew while booking volumes shrank, occupancy rates naturally declined.

• The UK average occupancy rate for August dropped to 54%, 2 percentage points lower than the previous year.
• Looking toward the end of the year, the market saw a slight pullback in booking activity in November, with the demand index slipping to –0.01, signalling uneven traveller confidence heading into winter.

2. The Revenue Paradox: Earning More from Less

Despite the drop in occupancy, the sector's financial health remains surprisingly robust. Operators have successfully leveraged pricing strategies to offset lower booking volumes.

Average Daily Rate (ADR) Resilience: Pricing power has remained strong throughout the year. In August 2025, the ADR hit £330, a remarkable 15% increase from August 2024 (£286). This resilience extended into the autumn, with November showing steady ADR growth.

Revenue Growth: The strategy of holding firm on price has paid off. Average revenue per property reached £4,331 in late summer, sitting 10% above the previous year's figures. Moving into Q4, RevPAR (Revenue Per Available Rental) continued to post gains, with October up +8% and November up +5% year-over-year.

The takeaway? Hosts are hosting fewer guests but extracting significantly more value from each stay.

The solution? Implementing a dynamic pricing tool can help guarantee your listing is optimally priced, ensuring you don't miss out on bookings due to an incorrect price.

3. Regional Performance: Winners and Losers

The UK is not a monolith; performance varies widely by geography.

• The North East stands alone: It was the only UK region to see growth in reserved nights (+1%) in August 2025, defying the national downturn.
• Scotland remains a stronghold, with the highest UK occupancy rate at 63%. Even as hotels in the region saw a +4% increase in ADR, the STR sector held its own with solid demand.
• London's struggles: The capital saw the largest year-on-year decline in reserved nights, dropping by 7%. Consequently, London's occupancy rate dipped to 38%, the lowest among the central regions.
• Wales: While ADR in Wales grew by +2%, occupancy fell by -2%, leaving overall revenue growth flat at 0%.

4. Changing Guest Demographics

Who is actually booking these properties? The profile of the UK visitor is shifting.

The Rise of the European Traveller: In August 2025, travellers from Europe (excluding the UK) significantly increased their market share, jumping from 54% to 62% of guest reviews month-on-month. Meanwhile, the share of visitors from the Americas and APAC regions declined.

Emerging Markets: While traditional heavyweights like the US remain vital, rapid growth is coming from new corridors. In July 2025, reviews from Saudi Arabia grew by +37%, followed by robust growth from Brazil (+13%) and the UAE (+10%). Conversely, markets like China (-108%) and Russia (-266%) continue to decline sharply.

Consider how you can market to international tourists to keep them coming year-round.

5. Behavioural Shifts: The "Last-Minute" Economy

The most critical operational change for hosts is compressing the booking window. The days of filling a calendar months in advance are fading.

Data show consistent year-over-year declines in lead times, with the average booking window shrinking by 4% in September and October, and 1% in November. This reinforces a pattern of last-minute decision-making.

Furthermore, guests are staying for shorter periods. Average stay lengths shortened by -0.1 to -0.3 nights across the autumn months compared to 2024. This increases operational drag, as turnover costs (cleaning, check-ins) rise relative to the rental income.

6. The Battle for Bookings: Direct vs. OTAs

A concerning trend for profitability is the continued erosion of direct bookings. In Q3 2025, the share of reservations coming from direct channels dropped from 53% to 45%.

Platforms like Airbnb and Booking.com are capitalizing on this, increasing their market share. While these platforms provide essential visibility, their dominance eats into margins. This widening gap highlights a strategic risk for property managers who rely too heavily on third-party platforms without nurturing their own guest databases.

The solution? Consider creating your own website where guests can book directly with you, thus avoiding the additional fees charged by the leading OTAs.

7. The Regulatory Landscape: A Storm on the Horizon?

While UK hosts have focused on occupancy and ADR, a significant regulatory shift is underway that demands immediate attention. The "wild west" era of short-term rentals is over, and 2026 will likely be defined by compliance.

The UK Context: What is Happening Now?

• The "Register" is Coming: The UK government has confirmed that the mandatory national registration scheme for short-term lets will go live in April 2026. This will require all operators to provide safety certification and occupancy data, creating a digital footprint for every listing.
• Tax Changes: The abolition of the Furnished Holiday Lettings (FHL) tax regime in April 2025 has already removed key tax advantages for owners, pushing many to reconsider their business models.
• Planning Permission: Discussions continue around new planning "use classes" (likely C5 or C7) that would require planning permission for properties not used as a primary residence, giving local councils the power to cap numbers in saturated areas.
• Scotland's Licensing: Scotland serves as the test case, with a comprehensive licensing scheme in effect since late 2024. Hosts there now face criminal offences and fines of up to £2,500 for operating without a license.

The "Spanish Warning": What Could Future Regulation Look Like? If UK hosts want to see where strict regulation leads, they need only look to Spain. The Spanish market is currently navigating some of the most stringent measures in Europe, serving as a potential blueprint for future UK policy if housing pressures intensify.

• Barcelona's Total Ban: In a landmark move, Barcelona plans to eliminate all 10,000 tourist apartment licenses by November 2028, effectively banning the sector to prioritize housing for residents.
• Community Vetoes: In regions like Andalusia, new laws require explicit approval from 60% of a building’s homeowners' association (HOA) before a holiday rental can operate.
• Mass Delistings: Madrid has already upheld orders to block thousands of Airbnb listings that failed to meet local rules.

The Takeaway for UK Hosts: While a total ban like Barcelona's is unlikely in the UK in the short term, the direction of travel is clear: more red tape, more transparency, and more power for local councils. Smart operators should view the impending 2026 registration scheme not just as a hurdle, but as a "quality filter" that will likely remove non-professional, non-compliant competition from the market.

Outlook for 2026

Despite signs of softening demand in late 2025, the outlook for early 2026 remains positive for prepared hosts.

• Winter Optimism: December 2025 on-the-books data shows occupancy pacing +5% higher than the previous year, with ADR up +3%.
• Forward Pricing: Bookings already secured for the start of 2026 are commanding strong rates, with ADR set to be around £301 in November 2025 bookings.

Conclusion: The "easy money" era of the UK short-term rental market has passed. Success in 2026 requires a professional approach: dynamic pricing to capture last-minute bookings, targeted marketing to attract the growing European and Middle Eastern demographics, and a relentless focus on compliance to stay ahead of the regulatory curve. The demand is there—but only for those professional enough to capture it.